I want to assume that you now have a business idea. If you don’t, click on the image below to read the guide I have done on getting business ideas. So if you have an idea already, it is time to test it for viability – to know if it is going to make money or profit.
I have many friends who are always getting business ideas. Some of the ideas are fantastic and that is all! They remain at the realm of fantastic and should never leave that realm because they are not viable. I have seen people lose a lot of money because they did not take their business idea through the viability test.
What problem is the idea solving (What need is it meeting)?
This is a very important test. I have heard people narrate their fantastic idea – believe me the idea can be very intriguing sometimes. But the only challenge is that the idea is not solving a problem and it is not meeting a need. Such an idea should remain in the “wow, it is fantastic” realm. Do NOT implement! Otherwise, your hands will get burnt.
Is the idea already “existing”?
By “existing”, I mean is the idea similar to that of a business that is already in existence? Granted, it is very difficult to find an idea that someone else is not already implementing somewhere. If this is the case, you need to test further;
- In what way is mine different from theirs?
- Why would people leave them and do business with me if I start the business?
- Do I have enough resources to beat the competition?
- Am I facing the competition head-on or am I targeting another set of people that the competition is ignoring? Why is the competition ignoring them?
When Facebook started, there were other social media platforms. But Facebook only concentrated on campuses. When they were confident enough due to the results they got, their confidence increased and bam! You know the rest of the story. What will you do?
How many people recognize that as a problem?
Yes, how many people recognize the “problem” you want to solve with your idea as a problem? Are you the only one seeing it as a problem? Are you the only one seeing the need? When Indomie Instant Noodles first launched in Nigeria, many Nigerians did not like the pasta idea. I remember that the food irritated me and my friends and siblings those days. Indomie worked really, really hard “seducating” Nigerians. Those years of “seducing” and “educating” Nigerians paid off. There is hardly any busy week I don’t eat Indomie Noodles. If you are the only one seeing the problem/need and you have resources like Indomie, fine. Otherwise, back out.
How many amongst those people will be willing to pay and keep paying to have the problem solved?
I like this test. If many people recognize that problem the way you do, what percentage of them have the ability and willingness to pay for the problem to be solved? Don’t just ask your neighbours. Move out. If you have a lecturer friend, approach them and ask if they can ask their students to do a survey for you. Data is power. Whatever the outcome of the research is, follow it.
How much money can be consistently made from the idea?
Another test you must put your idea through to check if it is a viable business idea is the “number test”. Create a cash flow projection of 12 to 36 months. The will help you to ascertain if the business will be profitable. For more information on cash flow projection, click the following link: Cashflow Projection: How One Can Save You.
How much time is needed to develop the idea into a product?
I have taught Project Management to so many and now uncountable audiences. One of my favourite topics is Cost of Quality. One of the costs of quality is time to do it right. How much time do you need to develop this idea into a product? No assumptions. Find out. Speak with the engineer, programmer, etc. If the time for development is long, make a long term plan. If its short, make a short term plan. Don’t quit your day job yet.
What is the cost of developing the idea into a product?
While you are trying to find out how much time time it will take to develop the idea into a product, also find out how money it will take. And can the development stop when you run out of cash and resume again when you get cash? These questions are too important. You don’t want to waste your money out of excitement.
Is the idea for today or for the future?
This should have been the first question. Many people have ideas that are wow. But sometimes the idea is not just for now. Sometimes the idea is for many years away. And sometimes it is not for this age. What do you do with such an idea? Document it and forget about it. Simple!
Is it needed in your location or in another location?
Where does the problem you want to solve exist? Is it in your location or in another location? How far away is the problem location? Since the problem is not existing everywhere, will it be around for another 100 years?
Honest having answers for these questions will save you much grief!
Any idea that does not pass at least 80% of these tests is a very risky one. I suggest that you speak with a business consultant and discuss your findings with him.
I want to hear from you!
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Do not forget to leave a comment below. Are you presently developing a business idea? What level have you reached?